Dreams Ltd is financed by both debt $($bonds$)$ and equity $($shares$).$

The debt$-$to$-$equity ratio is $0\mathrm{.}94.$ Below you have the YTM and the

weight of all outstanding bonds of Dreams Ltd$.$

The return on risk$-$free government securities is $5$ per cent and the

market risk premium is $6$ per cent. Dreams Ltd$.\text{'}$s shares have a

beta value of $0\mathrm{.}7.$ The corporate tax rate is $30$ per cent.

$($a$)$ Compute the cost of debt with the information of firm's

outstanding bond.

$(15$ marks$)$

$($b$)$ Compute the cost of equity.

$(15$ marks$)$

$($c$)$ Compute the after$-$tax WACC $($Weighted Average of Cost of

Capital$).$

$(20$ marks$)$

$($d$)$ Assuming that the market is efficient and there is no asymmetric

information, explain the relationship between the use of debt and

the value of firm. $($Hints: Use Modigliani and Miller propositions.$)$

$(50$ marks$)$